The word demand has a number of definitions such as need or desire or insistence on. However in economics and to the economists there is a different and very specific definition.
“Demand” from Funk & Wagnalls Standard Dictionary of the English Language International Edition: v.t 4. To have a need for; require; n. 4. The desire to possess combined with the ability to purchase; also the totality of such effectual desire in a given market with reference to a given commodity at a certain price. This latter definition of the word is the one used by economists. This definition will be used in the rest of this discussion.
Thus as an example of the contrast between the different definitions of the word demand; in the depression years of the 1930’s there was great demand (“need”) but there was very little demand (desire and ability to purchase) for housing, food, clothing and etc. The lack of demand in the economy was due to the inability to purchase because of the high unemployment.
Recessions and depressions are periods of low demand, in the economics sense of the word. Typically a downward spiral occurs, initiated by a slow down in demand, which the leads to companies reducing production and laying of employees; the laying off of employees reduces the overall demand due to the reduction of the ability to purchase; which the leads to further reduction of production and more layoffs—down things go. This spiral has been, since the “Great Depression” been partially alleviated by unemployment compensation, social security and government expenditures, as during WWII.
John Maynard Keynes advocated increasing the “demand” (Desire to possess combined with the ability to purchase.) by government spending to get more funds into the hands of consumers to increase their ability to purchase by providing them jobs. Following this policy has rescued capitalism in America several times in the last 100 years.
However following such a policy has led to inflation. But with the policy of the Banks being the only creators of money, and when creating more debt than money when they create money there is no good solution other than this policy.
Since we cannot dig money out of the ground, as we once did during “gold rush times” there is only one source of money into the economy. This is by the creation of money by the banks, by creating money out of thin air and loaning it out at interest. This quite clearly creates more debt than it creates of money. The only solution to keep the economy going to pay this debt is to keep increasing the money supply by ever more borrowing year after year. This is the only way that the interest can be paid for last year’s borrowing. The only entity that can have ever increasing debt is the federal government. That is the only way possible to keep the economy going. So this is what we have been doing.
So the money supply is increased by government borrowing, which then gets spent into the economy in a number of ways. Spending for defense, highways, salaries for government employees in all of it’s departments—many diverse items. Then this money that is borrowed by the government must all flow back to the government through taxes, plus even more to pay back this money that was borrowed by the government. This can only work by continually increasing the money supply. Thus it becomes clear that this system will only work by being in continual debt to the banks; with ever more borrowing by the federal government and inflation of the money supply. It is also apparent that this gives the bankers control of the economy through control of the money supply.
Back in 1791 banker Mayer Rothschild said “Allow me to issue and control a nation’s currency and I care not who makes its laws.”
President Lincoln had the treasury issue money during the civil war rather than borrow money at interest from the banks; thus avoiding the interest charges had he allowed the bankers to create the money and loan it to the government. President Kennedy issued an executive order to have the Treasury Depart start issuing silver certificates. The constitution specifically grants to the government the right to issue money and to regulate the value thereof. The reason it isn’t done? Both of these presidents were assassinated; so dare any politician follow this course? Rewards and punishment can also be used by the bankers to keep the politicians in line! Too often political candidates die in “accidents”.
Thomas Edison, Henry Ford, John Maynard Keynes and others advocated creating money based on commodities. Their proposal was the issuance of money based upon the value of the commodities in a number of various warehouses located throughout the country. Thus having a continual increase of the money supply based upon the increase of the productivity of the country. Thus breaking the hold of the bankers on the economy through control of the money supply. This would prevent the cycles of repetitive recessions and depressions.